By Rita Raagas De Ramos October 15, 2018
This is part three of a six-part series probing the concerns of American investors, as expressed to top financial advisors.
Nick Strain, Long Beach, Calif.-based senior wealth advisor at Halbert Hargrove, says his clients understand that capital markets may go through another crash similar to the technology bubble burst in 2000 and the global financial crisis in 2008, so many want to be prepared the next time around.
“They want to make smart decisions and plan ahead by asking these questions to ensure they don’t make a big mistake, which can significantly affect their retirement goals later on,” says Strain.
Here are the top three financial security-related questions Strain is asked by his clients, and how he answers them:
#1 Should I invest my excess cash now or wait?
“It’s critical to ask good questions in these cases to determine if the client will need to use these funds in the short, intermediate or long term. It’s also important to review their goals and financial plan and ask if there are any future purchases – like a car or a big vacation – or home projects that they were thinking about starting.
One of our clients in her 80s recently sold a real estate investment and received $190,000, then asked me if she should invest the cash or keep it in her savings account. Last year, she put a deposit on an independent living community and will need to decide if she will move into the community. By January 2019, she will have some maintenance costs to get her home ready to be sold and she has been wanting to take a big trip with her children. She also worries about the stock market and a decrease affecting her lifestyle. Because she is facing a big life decision at the beginning of next year, we suggested she keep the funds in her savings to pay for her normal travel expenses, the home maintenance expenses and, most importantly, so she will feel safe and comfortable to make a good decision in January to decide if she wants to move into the independent living community.”
#2 How much money do I need to retire?
“We love when clients ask this question because we get to explore what dreams and goals they’ve considered for years that they might not have told very many people. At Halbert Hargrove, we explore a broad set of topics during our Discovery Process with new clients to not only ask about the nuts and bolts of financial planning about current earnings and expenses and assets/liabilities, but also ask what are their passions, hobbies, family, and goals to touch on non-financial topics, which end up being very important to clients and typically do require some financial resources. Once we have the client’s goals written down, we can start the planning process of determining if they are on the right track to meeting their goals. We want to answer a few questions: Is the client taking an appropriate amount of portfolio risk? Are they saving enough money in their various investment accounts? Are they saving in the right investment accounts?
Once we create the savings strategy, then we can look at the projected accumulation of their investment accounts to see how much it grows to upon retirement. The fun part of this process is that if we start planning with clients many years before retirement, the client typically redefines what’s important to them and as a result, their retirement plan changes.
One client who is considering moving out of state is doing his own research and then traveling to each city on his list to check it out and see if he likes the area, homes, people and can envision himself living there in retirement. It is fun to be part of this process of exploration and then helping confirm if the client is on track to meet those goals and dreams.”
#3 How much can I withdraw from my portfolio in retirement?
“Our planning process is very helpful in addressing this question individually for clients because each will have their own goals, dreams, lifestyle or needs in retirement and at different times within retirement. We explore their needs, expenses and goals before simply providing a generic answer. One of our clients recently moved from Los Angeles and is building a home in Washington. An important component of her planning process was to define how much she would spend on building the house with an excess contingency if the house cost more than she projected. We also needed to confirm if her current investment accounts could support her after she takes out $500,000 to build her new dream home.
For other clients that retire in their early 60s before Social Security and Medicare[drawdowns are available], we expect to take a higher distribution from their investment accounts to pay for higher medical costs. Once they start Social Security [drawdowns], they can take a lower distribution amount from their investment accounts. In each of these cases it is important to account for both the everyday living expenses but also the aspirational goals that people have and to use our financial planning tools to confirm that they can accomplish their stated goals.”
Strain has been an advisor since 2005. Employee-owned RIA firm Halbert Hargrove says it had around $2.5 billion in client assets as of December last year.
For more information or questions, please contact Halbert Hargrove at firstname.lastname@example.org.